Advantages And Disadvantages Of Commercial Banks

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Since so many multi-dimensional changes are taking place in the Indian economy which are revolutionizing the way in which banking transactions occur, financial inclusion is a major challenge. MFI were set up to support the financial inclusion effort of the govt. Due to demonetization, increased competition and increased use of technology, MFI need to reinvent ways in which they conduct their business to survive.
So some of the options available with MFI are listed below:
- Acquisition of MFIs by banks/convergence/alliances between banks and MFI:
There is a clear cut distinction between commercial banks and MFIs as per the current regulation. But both have mutual benefit MFIs are acquired by the banks or MFIs act as business correspondent of large banks such as MFI can benefit by getting access to low cost of funds, can get access to new technology which may improve their efficiency and lending and collection processes.
On the other hand, large banks may benefit by getting access to the rural markets where they have low network and could aid in achieving the financial inclusion objective of the government. So this could be the win-win situation for the government. Also it will help MFI survive as they would be able to offer banking products to their customers in addition to giving small loans for a fee.
- Consolidation within MFI industry:
Larger MFIs with healthy financials i.e. balance sheet and income can acquire small and medium sized MFIs to get strong

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